U.S. exports have not only rebounded to their pre-recession levels, they are 10 percent above where they stood when the downturn started. This, even though they dropped faster than GDP during the worst months of the Great Recession. They came back faster than the overall economy and have been the one bright spot in an otherwise somber landscape.
For one of America’s most trade-focused states, this is no small thing. Washington’s exports recovered to $53.4 billion in 2010 from a “trough” of $51.9 billion the previous year. In 2008, they hit a record 54.5 billion vs. $36.7 billion in 1999.
Professor Jay Shambaugh of Georgetown University sees the growth mostly driven by world demand, especially in Asia, because the dollar’s moves can’t explain the rebound. He argues that this makes it clear that the slow growth in the overall economy is indeed a result of a deep demand hole left by the Great Recession, and not because of over-regulation or high taxes.
In Econobrowser, he writes:
The ability of U.S. firms to increase production and sell to markets where demand is growing is just more evidence that the U.S. economy is not fundamentally flawed or broken. Firms can find workers and increase output where they have customers. Yet while exports to growing foreign markets have been soaring, at home, residential construction has collapsed, structures investment by firms has collapsed, and state and local government spending has declined. All of these are a serious brake on demand. Compounding all this is the fact that real Federal Government consumption expenditures and gross investment in the third quarter was 2 percent below that of a year ago. This acts as a further brake on growth in output and employment.
The lesson: “There is plenty of reason to always make sure that supply side policies are sensible and worker training and education is adequate. But these do not seem to be the problems of today. Based on exports, the evidence shows that where there is demand for their products, American firms are more than ready to produce and to sell.”
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Today’s Econ Haiku:
Icebreakers on ice
As Arctic resources thaw
Frozen in D.C.